Unfortunately, business failure is common – and it’s not just startups and small businesses that fold every year. Fifty percent of the Fortune 500 companies that existed 20 years ago have disappeared, and the life expectancy of multinational companies is limited and shrinking.
Let’s explore the top 10 reasons why businesses fail – plus one important bonus tip.
Arrogance is a company killer. As soon as leaders become complacent, their companies begin to fall behind. To succeed, companies need humble leaders who still maintain a smidge of fear that motivates them into action. Leaders should be aware that they can't afford to cling to any past or current successes because sitting back on their heels will cause their companies to fall behind.
2. Not prioritizing sustainability
The number one job of any business is to help make our world a better, more equitable place. Every business must address the world’s most pressing sustainability challenges. Consumers and investors are already demanding more accountability from organizations when it comes to sustainability and diversity, equity, and inclusion – and this trend will continue to grow as they increasingly vote with their wallets.
3. Not putting customers first
Everything a company offers must provide value to customers and make their lives better and easier. Putting customers first also means not being afraid of letting go of existing products and services and getting rid of anything that doesn't add value to customers.
4. Not relentlessly innovating
Our world is moving incredibly quickly, and new and innovative ways to deliver products and services are emerging every day. Companies must relentlessly innovate so they can keep their competitive edge. Many companies are hesitant to change established products, services, or processes – but if they don't, there will be plenty of innovators that are more willing to change. Those companies will take the lead.
5. Not thinking of themselves as tech companies
We have never lived in a time with so many transformative technologies. Tech trends like machine learning, robotics, blockchain, and the metaverse are revamping every business in every industry. Because of the rapid pace of change – and technology becoming first and foremost in the business world – every business must think of itself as a tech company and put these digital transformations front and center.
6. Not treating data as a key business asset
Data is the lifeblood of successful companies. They use data to help make better business decisions, understand customers and market trends, create smarter products and services, and improve their business processes.
But all this data comes with a huge responsibility. Companies must keep information safe and comply with all applicable security legislation. The companies that succeed in the future will need to have a solid strategy in place that makes the most of their data while protecting partners and customers.
7. Failing to attract and keep talent
Recruiting and keeping top talent is a challenge for today’s organizations – but it’s always been true that people are the heart of every company. Companies that succeed are working on developing the right culture, and are prioritizing diversity. They are also implementing flatter, more agile hierarchies and management structures where people feel good and can be their most authentic selves.
8. Not developing future skills
The skills required to succeed at work are evolving faster than ever, and the half-life of today’s skills is rapidly decreasing. Every organization needs to ensure its people are continually developing the right skills, or they will simply be left behind.
9. Failing to build strong partnerships and integrate with others
No business can operate in isolation, and in today’s world, it's more important than ever to build strong and resilient partner relationships and supply chains. For business leaders, this may mean partnering with traditional competitors – a type of cooperative competition called "coopetition” – to tackle their industries’ biggest challenges.
10. Lack of authenticity and transparency
To build and maintain a successful organization, you must have the trust of your stakeholders and customers. Gaining this trust requires transparency, authenticity, and honesty – even when things go wrong. Organizations must communicate their purpose and mission, and be transparent about the business processes that affect customers.
A great example of this issue is transparency around a company’s use of data. The companies that try to hide the way they use data (or exploit users’ data for nefarious purposes) will fail, and the ones that are fully transparent about how, when, and why data is being used will thrive by building consumer trust.
Hidden Cause of Failure: Lack of Business Plan and Execution
Many businesses will fail because of a lack of short-term and long-term planning. Your business plan should include where your company will be in the next few months to the next few years. Include measurable goals and results, as well as specific task lists with dates and deadlines.
In my work with a large variety of organizations, I help them prepare for the future and translate their goals into a very simple plan and strategy that everyone can understand and deliver.